Stablecoins and Metaverse: The Next Big Bet for Y Combinator Startups

Stablecoins and Metaverse: The Next Big Bet for Y Combinator Startups

Stablecoins, the metaverse, and AI are areas where Y Combinator is encouraging businesses to innovate because of their potential to transform enterprise solutions, immersive tech, and finance. 

Stablecoins, the metaverse, and artificial intelligence (AI) are deemed to be the most promising sectors for innovation by the Silicon Valley incubator Y Combinator.

According to its annual “Requests for Startups” report published on Feb. 15, Y Combinator said stablecoins have enormous potential as an affordable cross-border payment option. The firm also sees promise in augmented reality (AR) and virtual reality (VR) technology applied beyond gaming.

Artificial intelligence (AI), however, can potentially streamline “back office processes” and enterprise software.

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Y Combinator Group Partner Speaks

Stablecoins are expected to “be a big part of the future of money,” according to Y Combinator group partner Brad Flora, who compared the sector to that of digital music in the early 2000s.

According to Flora, it all looks a bit like digital music’s transition from the realm of outlaw file sharing in the early 2000s to becoming the norm as players like Apple entered the market. Flora added that, importantly, those significant players were all outmatched by Spotify, a startup founded during that exact transition moment.

He added that this utility is so straightforward that it seems inevitable that traditional finance will follow suit.

Y Combinator’s Agenda Includes Cancer Cure

According to Flora, US banks hold $17T in customer deposits, which are also up for grabs. And yet, the major stablecoin issuers can be counted on one hand, and the major liquidity providers with just a few fingers.

Y Combinator is looking for tools, platforms, new stablecoin protocols, and proposals from teams creating B2B and B2C products using stablecoin technology.

Its investment focuses on multiple sectors, including AI, robotics, spatial computing, and climate tech. Discovering a cancer cure is one of its other ambitious goals.

Funding Startups

According to the company, Y Combinator has funded 81 Web3 and cryptocurrency firms, including Coinbase, OpenSea, TRM Labs, and Quantstamp.

Diana Hu, a different group partner at the company, notes that while these technologies are still developing, the company hopes to see more entrepreneurs creating non-gaming products for AR and VR devices.

Hu additionally said there are many challenges to solve in discovering the best use cases, UX/UI practices, and more. They are excited to work with founders at this technology’s frontier. She added that the recent Apple Vision Pro and Meta Quest 3 releases show progress in the right direction.

The user experience is improving, rendering power is increasing, and hand/eye tracking has improved dramatically, but work’s still to be done.

She further acknowledged that user experience (UX) and user interface (UI) issues continue to prevent widespread adoption.

Large language models (LLM), AI-built enterprise software, and “explainable AI” were all included in Y Combinator’s requested focus list for startups.

Harj Taggar, one of the Y Combinator’s managing directors, believes that AI can assist startups in developing their unique planning, human resources, and customer relationship management instead of having a one-size-fits-all enterprise solution.

According to Harj, a product based on this premise would be highly disruptive to large incumbents because now they can’t win by just copying you and adding another feature to their bloated software.

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